Is the Purchase of Telekom Srpska a good deal?
By reading the headlines of Serbian newspapers I see that there is a big debate of whether the purchase of Telekom Srpska is overpriced or not, and whether this was a good move or not. Different analytics are saying that Telekom Srbija should first invest in its operational efficiency and then invest abroad. Critics of this purchase claim that services offered by Telekom Srbija are terrible and investing 150 milion Euro more than the next buyer was willing to purchase Telekom Srpska, must have a political background to this deal. Premier Kostunica claimed that there will be more investments in Republika Srpska.
By investing in Telekom Srpska , the Serbian Telecom company extended its customer base to 7.5 million users. The goal of Telekom Srbija is to achieve the customer base of 10 million which is the number of users Telekom Austria has. What does Telekom Srpska bring in addition than just its customer base? According to Blic newspaper the following are the main points in the profile of Telekom Sprka:
-Year to Date profit of 31 million Euro (exceeding the forecast by 33%). Last years profit was 40 million. – 630 thousand mobile users and 360 thousand fixed line users – Internet provider “Teol” with 30 thousand users – License to provide mobile, fixed line and internet services across the whole Bosnia – employs 2.7 thousand employees – Owns “Telekard telefonske usluge“ and TT „Inženjering“
From the Strategic management point of view this can be seen as a potential good deal. The 650 million that was paid for this deal with the current profit structure of Telekom Srpska can be paid out in 16 years. That does not sound to be so attractive, but if Telekom Srbija’s goal is to reach 10 million users within a few years time, and buying a company who has a license for whole Bosnia may seem as a good step to achieve that target. However the questions now lies how well will the integration of two companies go and how well Telekom Srbija will be able to take advantage of the assets they bought.
From the political point of view one should ask himself why all the investments in Republika Srpska are happening now, just before the elections. On one side it seems natural that Serbia should be investing in Srpska due to the identical political, cultural and linguistic factors. Just like its easier for Germans to do business in Austria than in Italy, the same goes for Serbia and Srpska. But on the other side this seems like a perfect election campaign move where the current government is sending a message that Serbia is going to be an important factor in Republika Srpska.
Building up ties with Republika Srpska to me seems like a logical thing to do, but I hope that this is not just an election campaign move, but really a strategic move, that the next government will follow up on. I hope that the management of Telekom Srbija is competent enough to pursue the opportunity they paid for.
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I’m also left wondering about the deal Ivan. The truth is of course the ‘experts’ dont know themselves how all of this will turn out.
As you pointed out it really depends on Telekom Srbijas business strategy.
There is another factor to consider – its likely that Telekom Srbija will either re-capitalise or sell part of the company to a foriegn partner in the next few years. This deal will bolster the value of the company.
In the meantime I hope that Telecom Srbija will prove an exception to the usual problem of political staffing of state companies. In recent years it has done pretty well – perhaps to some degree due to competition with Karic and 063.
But now the whole sector is changing with Telenor and Mobikom so as they say its a whole new ball game.
I would be very sad if Telekom went into all of this in order to sell out in a couple of years time for a higher price. That would mean that this is just a stock market trading investment, but in reallity it has nothing to build a strong company.
I read a book “ Built to Last” (good read) and in that book it was analyzed that only those companies that create a culture and company personality can survive for more than 50 years. Those companies that make a boom but then get carried away by the <a style=‘text-decoration: none; border-bottom: 3px double;’ href=“http://www.qklinkserver.com/lm/rtl3.asp?si=92&k=stock%20market%20price&st=1” onmouseover=“window.status=‘Search for: stock market price’; self.ql_skeyphrase=‘stock%20market%20price’; if(window.event) self.ql_sevent=window.event.srcElement; self.ql_timeout = setTimeout(‘ql_doMouseOver(1)’, 1000); self.ql_isOverLink=true; return true;” onclick=“if(self.ql_timeout) clearTimeout(self.ql_timeout); self.ql_isOverTip = false; ql_closeiframe(); self.ql_skeyphrase=‘stock%20market%20price’; window.status=‘Search for: stock market price’;return true;” onmouseout=“window.status=’‘; if(self.ql_timeout) clearTimeout(self.ql_timeout); self.ql_isOverTip = false; setTimeout(‘ql_closeiframe()’, 1500); “>stock market price</a> forces, very often get to be forgotten.
I agree to this, and I hope that Telekom is working to become Serbias pride, just the way VW group is for Germany.
I want to invest?